Our nation’s largest prescription drug wholesale distributors usually get a pass when discussions surrounding drug diversion (the non-controlled type) and counterfeiting take place.  Because the overwhelming majority of their products originate directly from manufacturers, the diverted or counterfeit drug risk to primary wholesalers is relatively small and limited primarily to their receipt of saleable returns.  Nevertheless, the role of primary wholesalers in supplying shortage drugs and deeply-discounted own-use drugs that are subsequently diverted by their pharmacy customers into the wholesale market must not be overlooked. Thanks to a recent criminal case by FDA’s Office of Criminal Investigations, the shortage drug diversion issue highlighted by Congress five years ago is finally getting the attention of Federal prosecutors in the Department of Justice, especially DOJ’s Consumer Protection Branch.  Hopefully, we will see more OCI/CPB collaborations like this in the future!

On September 25, 2017, Karen Ann Turner pled guilty to a single conspiracy to commit wire fraud count and one count of money laundering in connection with a pharmacy-based drug diversion scheme.  According to DOJ, “Turner admitted that she operated two pharmacies to fraudulently obtain prescription drugs at low prices that were only available to pharmacies that agreed to use the drugs to fill patient prescriptions.  Instead of using the drugs to fill prescriptions as she said she would, Turner sold the drugs to drug wholesalers for more than she paid, taking the drugs out of their controlled distribution system.”

Five years previous, in its July 2012 drug shortages report, titled Shining Light on the Gray Market, Congress found that “gray market companies that operate outside of authorized distribution networks take advantage of drug shortage situations to charge exorbitant prices for drugs used to treat cancer and other life-threatening conditions. Gray market drugs leak out of authorized distribution chains, often through pharmacies that sell to wholesale distributors, and are sold to end users at aggressively marked-up prices. The questionable business practices of the distributors and pharmacies engaged in gray market sales result in higher health care costs and potential risks to patients.”

The Bill of Information in the Turner criminal case disclosed her ownership of a closed-door pharmacy (J&A Pharmaceutical Services, Inc.) that was co-located with a drug wholesaler (North, Inc.).  Interestingly, Congress targeted these same entities in 2012, reporting that “J&A Pharmaceutical Services, a pharmacy in North Carolina, sold drugs without a wholesaler license to North, a licensed wholesaler. Both entities were located at the same address and had the same owner. The North Carolina Board of Pharmacy found that J&A Pharmaceutical Services ‘ordered numerous injectable medicals, also found on the FDA Drug Shortage List, with no records of dispensation for any of them from June 2011 through December 2011.’ J&A voluntarily surrendered its pharmacy license in March 2012.”

So, what does all of this have to do with primary wholesalers?  This group of distributors should scrutinize pharmacy customers more intensely prior to engaging in transactions involving shortage drugs or deeply discounted own-use drugs.  For instance, enhanced due diligence measures will allow primary wholesalers to establish whether pharmacy customers attempting to purchase such drugs are co-located with or an affiliate of a wholesale distributor.  If so, additional efforts are clearly warranted to ensure that any sales of such products to these pharmacies will not result in the subsequent wholesale distribution of illegitimate products that are diverted and/or the subject of fraudulent transaction.

Primary wholesalers are unwittingly contributing to the presence of illegitimate products in our supply chain.  By ramping up their due diligence of certain pharmacy customers, they have the unique ability to reduce the flow of prescription drug products that are fueling diversion schemes, like the one described above.  As Congress pointed out, shortage drug diversion schemes present a potential risk to patient safety.  I’m willing to bet this criminal case, and any others like it, will surely get their attention.